Treasury Today Country Profiles in association with Citi

Banks loathe KYC too

Customer survey not good, okay and good faces. Good being selected

Study finds that senior banking salespeople spend nearly a quarter of their working week onboarding new client organisations.

Much is made about the KYC burden faced by corporates, and rightly so. Indeed, in a recent conversation with a senior corporate treasurer in Hong Kong, they noted that it was taking around three to six months to open a new bank account, even with a bank that it has an existing relationship with. This doesn’t even factor in the time spent maintaining KYC documentation for existing bank accounts.

Whilst it can be easy for the corporate community to blame the banks – they are the ones asking for this information after all – the banks, it seems, loath KYC processes as much as corporates.

Data from a recent study from the Global Legal Entity Identifier Foundation (GLEIF) found that 57% of senior bank salespeople spend more than 1.5 days of their week onboarding new client organisations, time that could be better spent acquiring new clients and supporting existing ones.

Onboarding challenges

The big challenge for banks when onboarding new clients is the reliability of the information they have.

One of the main reasons for this is the lack of consistency in the identifiers – tools that banks use to cross-check the information they receive from their clients – that banks use when onboarding new customers.

Respondents to the survey said that reference data provided by the identifier is often out of date. This leads to inconsistency and confusion, especially when using multiple identifiers. The result is that the more identifiers used by banks, the more time it takes to onboard clients, with those banks that use four or more identifiers taking seven weeks on average.

Fifty-five percent of respondents also noted that more resources (especially people) could help speed up the process. However, there is a question mark around how much more money banks can throw at this problem.

Negative impacts

The big concern for banks is that the time and effort it takes to onboard clients will lose business, with 39% highlighting such a fear.

There may be some justification for this anxiety because whilst many corporates understand that lengthy and painful KYC is a reality, 15% of banks, according to the survey, have had clients leave because the onboarding process is too difficult/takes too long. Indeed, Treasury Today has reported on corporates switching banks because of especially bad KYC experience.

The risk of losing customers is especially acute if there is a lack of understanding from their corporate clients around regulatory requirements, meaning that they might not understand why the bank is asking them for certain information – especially when that information is highly sensitive.

No improvement … yet

The bad news is that 52% of bankers surveyed believe that onboarding times will increase over the next 12 months. Driving this will be external factors such as increased fraud and tighter regulations. Internal factors like bank compliance budget limitations and process limitations will also play a role.

In the longer term, it is hoped that a consolidation of identifiers will make it easier for banks to streamline and quicken the onboarding process. This will also help corporates who should be more ready and willing to promptly report material changes to their legal identity.

Finally, new technology will also play a role with digital signatures, KYC utilities based on blockchain and digital certificates all cited as being tools that could improve life for banks and corporates.